Ten years after voting for independence, the Timorese have little to show for supposed freedom. Lindsay Murdoch paid a visit.

Celina Guterres does not care about the bloodshed that swept East Timor when it voted 10 years ago to break away from Indonesia. Each day in her village deep in the heart of the mountains she struggles to find enough food for her four children, her husband and his gravely ill father.

"After 10 years of independence our lives have not improved," she says, nursing her eight-month-old daughter, Louzelia, outside the family's bamboo house, with its dirt floor and no electricity. "We grow rice but no one will buy it. We have a small fish pond but no one will buy our fish. We have no way of earning money and only eat what we grow. I am not optimistic about the future for my children."

Guterres's village of Loi Hunu is a bone-jarring six hours' drive east from the capital, Dili, where plane-loads of international visitors are flying in for events tomorrow marking the 10th anniversary of the vote for independence.

For weeks the village has been preparing for the anniversary because it was selected as an overnight stop for the inaugural Tour de Timor, a five-day bike race which this week tapped rarely seen nationalistic sentiments across the tiny half-island nation of a million mostly impoverished people.

The village's drum band practised day and night, leading proud warriors, machetes raised, across a rocky parade ground in a valley below vertical cliffs disappearing into misty clouds. Flags were hung and feasts of local delicacies were prepared, including buffalo and deer. They even built a bamboo throne on which to hoist the President, Jose Ramos-Horta, in case he arrived for the race (he cancelled at the last minute, due to other commitments). Every day this week thousands of Timorese waved flags along the 450-kilometre race route, cheering 320 riders, many of them Australian.

"This is all about pride for our people who were repressed for decades. It's like a coming out," says Domingas ''Falur'' Raul, a former commander of anti-Indonesian guerillas and a native of Loi Hunu.

The race and adjacent "festivals of peace" have fostered a festive mood for tomorrow's formalities. Raul, a lieutenant colonel in East Timor's army, says the difference with colonial times is that people now can smile. "My people still don't have material things. But they are free."

Satellite images of Dili in 1999 showed a city of empty blackened ruins. Ten years later East Timor has emerged from ashes to become a rapidly growing and busy city not unlike many in neighbouring Indonesia.

More than 100,000 people who fled to squalid refugee camps amid violent upheaval in 2006 have returned to rebuild homes. New hotels and a shopping mall are being built. Streets are jammed with vehicles. Markets are full of produce. And 600 Australian and New Zealand soldiers and 1600 United Nations police patrol streets mostly cleared of politically motivated gang violence.

Those on the government payroll, from the President down, collect street rubbish on Friday mornings before starting work. Instead of the "failed state" criticism of a couple of years ago, the government spokesman Agio Pereira boasts East Timor is the world's second-fastest growing economy, albeit from a very low base. "This is a moment in time when we should recognise our collective achievements," he says.

But a decade has not erased uncertainty about the future of a country where 70 per cent of people live rurally, surviving on subsistence farming and food bartering.

Forty per cent of Timorese live below the poverty line, life expectancy hovers around 60, and one woman in 35 dies in childbirth (compared with one in 13,000 in Australia).

It is a mistake to think East Timor is inevitably maturing into a stable democracy. Trouble can erupt again. The country's elite decision-makers probably number no more than 40, and most carry baggage from past disputes, places and events. Their loyalties and enmities make it difficult to establish a professional, corruption-free bureaucracy.

Vast goodwill from other countries has largely been squandered. La'o Hamutuk, a non-government organisation in Dili, estimates only 10 per cent of $US5.2 billion aid sent to East Timor in the past 10 years went direct to East Timor's economy. It says the rest was spent on international salaries, overseas procurement, imported supplies, consultants and the like.

For all their generosity, however, key donor countries have exhibited self-interest, too, buying up large tracts of land along Dili's main beach road for their fortified embassies and residences. That is land that should have been set aside for hotels, resorts, cafes and other businesses that support a tourist industry.

Coffee is East Timor's only significant export other than oil but the tourism potential is huge, particularly community-based eco-tourism.

Loi Huna, where cyclists stopped one night, is spectacular, with waterfalls, swimming holes and a vast network of limestone caves. An eco-tourism village is being built there.

Rebuilding East Timor after its destruction by rampaging pro-Indonesian militia in 1999 was always going to take decades, given every institution had to be rebuilt from scratch. But thousands of reports from the UN, the World Bank and other international agencies have done little to help build those institutions. The military and police consequently lack appropriate values.

Until elections in 2012 the coalition government in Dili will continue to dip heavily into a $US5 billion oil and gas revenue fund intended for future generations. The Government plans this year to spend $US681 million, a 40 per cent increase on last year. Critics say money is wasted on quick fixes that do not create permanent jobs and do not build self-sufficiency.

The only oil and gas field in production will be exhausted in 2023. East Timor and Australia agreed in 2002 to share equally the Greater Sunrise field royalties - about $US15 billion to East Timor over the life of the deal.

East Timor's leaders want a pipeline built from the Timor Sea field to a gas processing plant in East Timor. The switch would create local jobs and bring an extra $US3 billion revenue but Woodside, the field operator, insists it has two options: a floating plant above the field or piping the gas to an existing plant in Darwin.

If East Timor blocks development until 2013, the treaty with Australia could collapse and East Timor's reputation for business reliability dashed.

Probably East Timor's most serious wrong turn, according to non-government organisations in Dili, was its biggest infrastructure investment: three power plants that are 20 years old and are fuelled by heavy oil. They were bought from the Chinese for $US400 million and will need expensive importations of heavy oil for decades. Such plants are banned in most countries because they are heavily polluting, create acid rain, and produce toxic solid and liquid wastes. They are also hard to operate.

Like many of its contracts, the Government refuses to reveal details. Acquisition of the generators was not put to open tender and there are no wharves capable of handling the generators' arrival.

Violence still haunts Timorese. Pat Walsh, a senior adviser in a secretariat established to disseminate Chega! - the report of East Timor's Commission for Reception, Truth and Reconciliation - says tomorrow's anniversary and the release of the film Balibo, depicting the killing of six Australian newsmen by Indonesian soldiers in 1975, have revived memories of atrocities.

Timorese MPs have delayed discussing the commission's findings, which were handed to the Prime Minister, Xanana Gusmao, late last year.

More than 100,000 were killed or starved to death in East Timor between 1974 and 1999. In the months before and after the UN-sponsored independence vote in 1999 up to 1500 were killed, most of the country's infrastructure was destroyed and a third of the population was forced into degrading refugee camps in West Timor.

The 2800-page report Chega! (Portuguese for ''Enough!'') was the result of three years' intensive investigations of countless atrocities. Of those prosecuted in East Timor, only one remains in jail. Of those prosecuted in Indonesia, all were acquitted in flawed proceedings.

A UN serious crimes unit indicted the prominent Indonesian general Wiranto for crimes against humanity over his command in East Timor in 1999. But there has been no prosecution, and Wiranto has contested Indonesian elections since.

This week Amnesty International called on the UN Security Council to establish a tribunal with jurisdiction over abuses in East Timor, saying the path pursued by governments in Dili and Jakarta has weakened the rule of law in both countries.

The UN mission in Dili has completed 86 investigations into 396 crimes committed in 1999 and submitted reports to East Timor's Office of the Prosecutor-General, which has a caseload of 5000 and lacks the political will to bring them to court.

The trial of the Timorese-born Australian Angelita Pires - the former girlfriend of the slain rebel leader Alfredo Reinado - and rebels accused of involvement in attacks on the President and Prime Minister last year will take months, and there are suspicions about the investigations.

Ramos-Horta says the idea of an international tribunal to prosecute past crimes is stupid but Walsh, an Australian who has lived in Dili for years, says people keep returning to it because they see no option. "The parliament seems oblivious to the fact that continued stonewalling on Chega! is contributing to growing militancy and is bad politics," he says.

Hundreds of atrocity victims will soon converge on Dili with demands that the guilty be brought to justice and that victims be compensated. Edio Saldanha Borges's father was shot dead by Indonesian soldiers two days after the independence vote. He says East Timor leaders who oppose pursuing prosecutions are not listening to ordinary Timorese. "The Government has paid compensation to the victims of the 2006 violence and pensions for the war veterans and others but not for the victims of 1999.''

Jose Nunes Serao was holding his four year-old son when a pro-Indonesian militia member smashed a machete into his head at a massacre at the church of Liquica in April 1999. "My hope for Timor is to have a good future, but with peace and justice," he says.